African Comprehensive Free Trade Agreement
“This is not just a trade deal, it`s our hope that Africa will emerge from poverty,” Wamkele Mene, Secretary General of the AfCFTA Secretariat, said at the virtual launch event. There is a strong consensus that the huge infrastructure gap in Africa, including transport and supply infrastructure, needs to be urgently addressed so as not to limit further trade integration. Infrastructure development is also key to addressing the devastating economic impact of COVID-19. The agreement aims to reduce all trade costs and allow Africa to further integrate into global supply chains – it will eliminate 90% of tariffs, focus on outstanding non-tariff barriers and create a single market with the free movement of goods and services. Reducing bureaucracy and simplifying customs procedures will lead to a significant loss of revenue. In addition to trade, the Pact also addresses the free movement of persons and labour, competition, investment and intellectual property. Another consideration is what the AfCFTA will mean for regional and national trade agreements with other countries, such as.B. Economic Partnership Agreements (EPAs) that some African countries and groups of countries have negotiated or are in the process of negotiating with the EU. In addition, some AU member states, such as Kenya, have entered into bilateral negotiations with other trading partners such as the United States.
The report shows that despite the continent`s Regional Economic Communities (RECs), regional integration in Africa has largely been an unmet goal. Overall, REBs have complex and often contradictory policies and have so far achieved very different levels of integration. And while African countries can trade within their respective RECs on preferential terms, beyond these regional agreements, trade is generally subject to most-favoured country (MFN) tariffs, which are much higher and have had a deterrent effect on trade integration. African countries opened their markets on January 1 under the Continental Free Trade Agreement, and duty-free trade in cross-border goods and services is underway despite the COVID-19 pandemic and other start-up issues. The report shows that trade in services is particularly promising, given that the services sector currently accounts for more than half of gross value added in Africa. The growing importance of services across the continent also suggests that Africa could accelerate this growth in the future through the AfCFTA. However, policymakers need to better understand the important role that services can play in regional value chains to take full advantage of them. This will enable the continent to address structural barriers to growth in these sectors. The report notes that easing restrictions on the foreign policy of governments across the continent will increase the flow of services trade between countries.
For example, better access to information and telecommunications systems would encourage companies to enter new markets. The AfCFTA Secretariat will be responsible for coordinating the implementation of the agreement and will be an autonomous body within the AU system. Although it has an independent legal personality, it will work closely with the AU Commission and will receive its budget from the AU. The Council of Ministers responsible for trade decides on the seat, structure, role and responsibilities. [35] The Assembly of Heads of State and Government of the African Union is the supreme decision-making body. It is likely that it will meet at AU summits. [39] The Council of Trade Ministers provides strategic trade oversight and ensures the effective implementation and enforcement of the AfCFTA Agreement. [39] The AfCFTA offers African countries the opportunity to diversify their economies, increase their production capacities and expand the range of products manufactured in Africa, in particular by stimulating the production of industrial goods. Closer integration of neighbouring economies is a potential means of creating scale and competitiveness through the enlargement of the internal market, thus promoting development through greater efficiency. This applies to both intra-regional trade and trade with non-African countries. In March 2018, three separate agreements were signed at the 10th Extraordinary Meeting of the African Union on the AfCFTA: the African Continental Free Trade Agreement, the Kigali Declaration; and the Protocol on the Free Movement of Persons. The Protocol on the Free Movement of Persons aims to create a visa-free zone in the AfCFTA countries and to support the creation of the African Union passport.
[27] At the Kigali Summit on March 21, 2018, 44 countries signed the AfCFTA, 47 the Kigali Declaration and 30 the Protocol on the Free Movement of Persons. Although it was a success, there were two notable resistances: Nigeria and South Africa, Africa`s two largest economies. [28] [29] [30] As of July 2019, 54 of the 55 African Union states had signed the agreement, with Eritrea being the only country not to sign it. Of these Member States, 27 have deposited their instruments of ratification. [43] [44] Officials say the terms of the AfCFTA will already apply to trade in these products, as discussions on rules of origin cover about four-fifths of tariff items. In trade jargon, rules of origin refer to the amount of content that must be produced locally to be considered to come from that country. According to the United Nations Conference on Trade and Development (UNCTAD), simplified and flexible rules of origin are crucial for the region, which is below the level of intraregional trade in most other regions of the world. UNCTAD`s report on Africa`s economic development notes that the impact of preferential rules of origin could be mitigated if they are too complex and, inter alia, if there is no improvement in industrial production capacity.
The summit gave the official launch of formal trade, which is expected to begin on the first day of the new year. Manufacturing GDP averages only 10% of Africa`s GDP. This means that limited production capacity in Africa is currently offset by foreign imports. Nevertheless, this production deficit could eventually be compensated on the continent and made possible by the AfCFTA. Industrial products currently exported by their competitors to African countries, particularly industrial machinery and motor vehicles, account for one third of the total trade flow in Africa. However, a significant proportion of these intraregional exports of industrial goods are re-exports of industrial products imported from the rest of the world. Eritrea did not sign due to tensions with Ethiopia, but following the 2018 Eritrea-Ethiopia summit, the AU Commissioner for Trade and Industry now expects Eritrea to sign the agreement. [93] As trade continues under the AfCFTA, the delay in discussions on timetables and rules of origin has raised concerns among trade observers and trade officials that full implementation is still a long way off. In addition, some experts noted that the success of the agreement in making trade smoother across the continent will also depend in part on the development of better infrastructure, especially transport. This shows that African nations do not trade with each other because of a mismatch between what different African countries need and what is produced on the continent. This misalignment signals missed opportunities to reduce foreign imports from outside Africa and increase intra-continent trade flows.
For the AfCFTA to be fully successful, more countries need to diversify their commodity production to better meet the import needs of their continental neighbours. In 1963, the Organization of African Unity (OAU) was founded by the independent States of Africa. The objective of the OAU was to promote cooperation among African States. The Lagos Plan of Action of 1980 was adopted by the organization. The plan suggested that Africa should minimize its dependence on the West by promoting intra-African trade. This began with the establishment of a number of regional cooperation organizations in the different regions of Africa, such as the Southern African Development Coordination Conference. This eventually led to the Abuja Treaty in 1991, which created the African Economic Community, an organization that promoted the development of free trade areas, customs unions, an African central bank and a common African monetary union. [21] [22] Although the Phase 1 Agreement and Protocols were adopted in early 2018, the process of obtaining the signatures and ratifications required for entry into force continued until 2019. .
